Legislators Need to Know the Cost of Health Care Mandates
April 29, 2021
By: Jamie Dudensing
When members of the Texas Legislature consider a bill, they often consider the fiscal note (an estimate of what new legislation would cost the state) to weigh the costs and benefits of the legislation and make a decision. But when it comes to health care, legislators also need to understand the financial impact new health insurance mandates have on Texas employers and families.
House Bill 2600 would provide a fiscal impact statement for each bill that creates a new mandate for health benefit coverage. Those mandates could include required coverage for particular benefits, increased payments to health care providers, or new contractual and administrative requirements.
The Texas Association of Health Plans strongly supports this legislation. Legislators should have better information regarding the financial impacts of new mandate laws.
When the government mandates something in health care, a small population may benefit from the particular mandate, but premiums go up for everyone. While a single mandate may only increase premiums by 1%, that increase in premiums has a large financial impact on families and employers. Each percentage increase in premiums costs consumers and employers an estimated $230 million a year in the fully insured market.
Texas employers shoulder the greatest cost burden when it comes to government mandates because most Texans receive health coverage through their employer. In a recent survey of NFIB members, small business owners in Texas ranked the cost of health insurance as their single biggest problem and priority.
Texas is already a leader in the number of costly health insurance mandates, ranking third in the nation for the most mandated benefits. Just this year, twelve mandate bills have already passed out of the House Insurance Committee.
Because of the added costs of state health insurance mandates, small businesses are discouraged from offering health coverage to their employees, increasing the number of Texans without health care coverage. While 99% of large employers offer health benefits, only 56% of small employers do. Firms not offering health benefits continue to cite cost as the primary reason. Research shows that one in five of these small businesses would offer health benefits if there were fewer mandates.
Recent polling finds that small businesses see health costs as a growing burden during the COVID-19 crisis. According to a separate poll of small businesses, one in three small business owners is struggling to provide health coverage for themselves and their workers. About 36% lowered their employer contribution to workers’ premiums and over half switched to a plan with lower premiums. Nearly one in five of those surveyed said they would need to make changes or reduce health coverage in the coming months. Employees ultimately pay the high price of mandated benefits through high premiums, higher co-pays, reduced wages, benefit reductions, or job loss.
The information needed to create the fiscal impact statements required by HB 2600 already exists. State law requires agencies such as TDI to consider increased costs to people and entities subject to new state regulations, but this information is not provided to legislators. At the federal level, the Congressional Budget Office already offers similar analysis for Congress, and 26 other states have mandated benefit review (MBR) laws. Some larger states like Pennsylvania, Virginia, and California have additionally set up new agencies to do the review.
HB 2600 will allow legislators to fully appreciate the impact of new mandate laws, likely reducing the number of new mandates adopted and helping to stop escalating insurance cost for Texans.